Russian and Ukraine: a crisis on many fronts
The situation in Ukraine is creating a desperate humanitarian crisis. First and foremost, our thoughts are for those suffering directly from this abhorrent war. The secondary ramifications are being felt around the world. Read on for a greater understanding of the potential impacts…
From a food perspective, Russia and Ukraine produce about 30% of the world’s wheat. This has now effectively been cut-off from the global market’s food supply chain.
Global wheat prices have already escalated by 60% since February. Crude oil is also continuing to surge. This reached a 14 year high at the time writing. There appears to be little chance of it abating any time soon.
Furthermore, Russia and Belarus are leading fertiliser producers. The CEO of Yara International, a large fertiliser multinational, told the BBC: “For me, it’s not whether we are moving into a global food crisis – it’s how large the crisis will be.”
In relation to the impact within the UK, the Times Newspaper reported that:
“The disruption of trade with Ukraine could heap further pressure on food prices. The country’s biggest exports to the UK include cereals, cooking oil and animal feed. Increases in the cost of raw materials and energy are likely to be passed on to consumers too.”
Pantheon Macroeconomic forecasts that UK “CPI inflation now is set to rise to 8% in April, and touch 8% again in October, due to the surge in energy prices”. This is an increase from the Bank of England forecast of 7.25% in April. You can keep abreast of food supply chain prices and see what commodities are doing using heat maps and reports here.
This invasion comes at a time when the input cost factors for the food supply chain and food production were already very high. The UK food inflation outlook is now set to rise further still.
Worryingly, food security is now a real concern globally.